Aussie households are struggling
Aussie households are struggling – Image: Unsplash
  • Over one in four are seeing savings go backwards
  • Rising prices hit groceries and energy, increasing financial pressure
  • Financial literacy and shopping around can help save money

The cost of living crisis is continuing to hit households right across the country, with a new report finding that 61% of Australians are only just getting by as prices soar.

Compare the Market’s ‘Household Budget Barometer’, which surveyed 3000 households, also found that more than a quarter of adults (26.3%) are seeing their savings going backwards, as they try to tackle rising prices.

Compare the Market’s General Manager of Money, Stephen Zeller, said surging inflationary pressures and cash rate rises are crippling households.

“There has been unprecedented financial change in the last 12 months and unfortunately the turmoil doesn’t look likely to end anytime soon,” said Zeller.

Zeller said rising interest rates alone have put households under extreme financial pressure.

“A $500,000 variable mortgage holder has already seen an extra $1,209 added to their monthly repayments since the RBA started chasing its inflation target in May last year.

“On top of that, we’re expecting electricity price hikes of up to 25% for those on default plans, when the new Default Market Offer and Victorian Default Offer take effect on 1 July.

“With households getting hit at every corner, it’s no surprise 94% say they’ve felt the difference.”

Stephen Zeller, Compare the Market’s General Manager of Money

Bank of Mum and Dad

The report also found that Millennials and Gen Z were more likely to get help from their parents and family to purchase their first home. More than 30% of Gen Z and 26% of Millennials said their family helped contribute to the deposit.

Meanwhile, more than 50% of Gen X and Baby Boomers said they had no help from family members whatsoever said Zeller.

“While each generation has faced different hurdles to homeownership, broad consensus is that young people today have it the hardest as climbing house prices continue to outpace the size of deposits.”

Rising prices

According to the report, two-thirds of Australians said rising grocery prices were making life even more difficult; the sharp increase in energy prices, including fuel, was also leading to at least 50% of households feeling pressured financially.

Baby boomers were most worried about the rise in the cost of home insurance, while millennials and Gen X were worried about their mortgage repayments.

Gen Z was mostly concerned about the cost of internet and phone bills, fuel, pet insurance and upkeep and streaming costs.

In terms of income brackets, high earners ($150,000+) were the least concerned Australians about fuel while owner-occupiers with an income over $100,000 were significantly more worried about mortgage repayments than homeowners on smaller salaries.

Level of household savings

Source: Compare the Market.

High debts

Even though more than half of Australians have credit card debt, only 25% would pay it off if they were given $500. Just over 35% of Australians would put the money into a bank account, while one in five (19%) would put it towards regular weekly expenses.

The age group most likely to pay off debt is Gen X (33%), Millennials (26%), Baby Boomers (22%), followed by Generation Z (21%).

While Buy Now Pay Later (BNPL) debt is weighted heavily towards younger generations.

Zeller said there were signs the number of indebted households has been rising.

“Increased cost of living expenses, fuel, gas and energy prices have undoubtedly put strain on the budget belt of many Australian households.”

“In December 2022, the number of arrears was 0.76%, up from 0.65% in November 2022.

“But borrowers aren’t the only ones who are feeling the pressure at the hip pocket.

“Tenants have been slapped with higher rental prices as landlords have attempted to pass on the heat.”

Learning to manage money

Zeller said improving financial literacy should be a top priority for younger Australians with half learning money management from their parents and a quarter stating that they are self taught.

“People without an education in budgeting basics are at a huge disadvantage when living costs rise.”

“We urge people not to be passive when they receive bills and renewal notices, to check and make sure they’re not paying for unnecessary services, fees or add-ons.

“Whether your mortgage repayments are going up, you’ve received a higher-than-expected bill or you want to ensure you’re not paying more than you need to for your insurance or fuel, it’s worth taking time to compare your options.

Despite rising costs, almost half of Australians (45%) said they hadn’t shopped around for a better deal to try and save during the past 12 months according to Zeller.

“A lot of people are spending more than they need to without realising it or wrongly assume that researching alternatives will take too much time.”

“Lower income earners were less likely to shop around for better deals, despite standing to gain more from the process than people with larger paypackets to spend.

“What could be small change for some households could make a world of difference for people doing it tough.”

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